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Shree Nagani Silk Mills Pvt. Ltd. vs L.D. Industries Ltd. & Ors.

Not available · 2025 INSC 1064Decided 2 Sept 2025
Not available
Justice Manoj Misra · Justice Ujjal Bhuyan

Background

The appellant company had supplied goods to L.D. Textile Industries (the accused company) and received several cheques worth roughly Rs. 20 lakh each towards part payment, all of which were dishonoured for insufficient funds. The appellant filed multiple complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, and the Magistrate issued summons to the accused. The accused sought recall of the summons, arguing the company had been declared "sick" under the Sick Industrial Companies (Special Provisions) Act and was restrained by the BIFR from disposing of assets, which prevented it from responding to the demand notice. The Magistrate rejected the recall application, but a Sessions Court, in revision, set aside that order and discharged the accused; the Bombay High Court upheld the discharge.

Decision Breakdown

The Supreme Court held that recall of a validly issued summoning order is not permissible under the settled law laid down in Adalat Prasad v. Rooplal Jindal and affirmed by a Constitution Bench in In Re: Expeditious Trial of Cases under Section 138 of NI Act: a Magistrate has no inherent power to review or recall a summons once issued. The Court also found the revisional court and High Court had misapplied the earlier ruling in Kusum Ingots, clarifying that a BIFR restraint order does not automatically bar criminal proceedings under Section 138; that issue depends on case-specific facts such as the timing of the cheque and the reason for restraint. The Court allowed the appeals, set aside the orders of both the High Court and the revisional court, and restored the complaints for the trial Magistrate to proceed in accordance with law.

Lesson Learnt

A Magistrate cannot recall or review a summons already issued in a cheque-bounce case: the only recourse for an accused is to defend the case on merits at trial; a company's "sick" status or a BIFR restraint order does not automatically shield its directors from cheque-dishonour liability.

Official source (sci.gov.in)View Judgment (PDF)

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